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The Importance of Saving
At a time of political and financial uncertainty, it is more important than ever to look closely at your finances and ensure you are making adequate provisions for the future.
Whether it is saving for specific outlays such as cars, holidays, a wedding, university or buying a property, or putting aside enough funds to create a buffer in case of a sudden income shock or other change in circumstances, saving is key to protecting you and your loved ones.
Yet almost 10 million households in the UK have no savings at all, according to research by debt charity Stepchange. Of those who do save, 19.3 million (71%) have less than £10,000 put away.
Changing Financial Habits
Financial habits have changed over the years and more and more people are neglecting to regularly put aside money, spending more than they earn and getting into debt in order to fund their lifestyles.
An increasing number of middle-class families are at risk of spiralling into debt, with Stepchange helping over 20% more families in 2017 than three years previously.
Often savings – even small amounts – could help prevent debt from becoming an issue. “Our research shows that, if every household had £1,000 of accessible savings, 500,000 fewer households would face problem debt,” says Stepchange’s Sue Anderson.
Sometimes the idea of saving can sound unrealistic, but changing financial habits and attitudes towards money is the first step. Saving regularly or investing lump sums can create an important safety net in an uncertain climate.
The earlier you decide to save, the better chance you have of ensuring financial security for the future for yourself and your dependents, where even small amounts can add up to make a significant difference.
Our financial advisors can offer expert advice tailored to your individual needs to help identify the best savings and investments options for you, including unit trusts, investment trusts, NISAs, onshore and offshore investment bonds, private portfolio management and investments for children and grandchildren.
Individual Savings Accounts
One of the best-known options is an Individual Savings Account (ISA). As one of the most popular savings plans in the UK today, ISAs offer a simple and flexible option. They can be opened with as little as £1 and individuals can currently invest up to £20,000 per tax year into an ISA. Your annual allowance can be invested in a cash ISA, an investment ISA, an innovative finance ISA, or a combination of the three.
An ISA is not subject to either income or capital gains tax, making it a tax-efficient savings option that is often an advantageous choice for available cash currently resting in a bank or building society account.
The stocks and shares component of an ISA can be invested into OEICs, investment trusts or directly into equities, gilts or corporate bonds. Our specialists will advise on the best investment strategies for maximum growth.
If you choose a collective investment option, your money is pooled with the funds of many other individual investors and overseen by professional fund managers, who choose from a range of assets, including company shares, bonds, gilts, property and specialist areas such as hedge funds or ‘guaranteed funds’.
The three main types of collective investments available on the UK market are Unit Trusts, Investment Trusts and Open-Ended Investment Companies (OEICs).
- Unit Trusts – Investors buy a number of units, which can be sold back to the fund manager by the investor. The value of the trust is calculated each day and divided by the number of units to provide bid and offer prices for buying and selling.
- Investment Trusts – Investors buy actual shares in a company rather than units, which are traded in the same way as traditional limited company shares.
- OEICs – Similarly to Unit Trusts, investors buy several units, but there is no bid or offer spread, so buyers and sellers get the same single price for the shares. They are more flexible than Unit Trusts, making switching between different investment funds easy.
Another type of collective investment, Investment Bonds pool together individual funds, enabling relatively small investors to benefit from the economies of scale made available to institutional fund managers.
Investment Bonds may provide a regular tax-deferred income, whereby investors can take up to 5% of the capital as annual income – for up to 20 years – without any immediate tax liability.
They allow you to invest in either an insurance company with profits fund or the units of an underlying equity fund. Options include With Profits Bonds, Unit Linked Bonds and Offshore Bonds.
Our investment specialists can help you understand the benefits of each option, and choose the investment bond that is right for you based on factors including fund performance, enhanced allocation rates, charges, administration levels, the number of funds available, the financial strength of the provider and the flexibility of the contract.
Fund Supermarkets and Wraps
Larger investors may have more sophisticated and tailor-made requirements. Fund supermarkets offer a wide range of mutual funds through a single platform, while wrap accounts combine all of an investor’s listed securities, shares and managed funds into one account, offering more flexibility and making managing investments more streamlined and time effective.
Clients can also benefit from a tailored and adaptable approach to investing with the choice to manage a portion of investments directly or to use a model portfolio.
Take the first step today
Whether you are new to saving or would benefit from understanding the current savings and investment options available on the UK market, get in touch today. Our investment specialists will provide advice tailored to your current financial situation and future plans to help you find the most effective savings options for you.
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